Deposit held as Agent by seller

lavalamp1

Hi all,

So I am very close to exchanging with a chain of 3 people and I have been informed by my solicitor that the contract contains a condition that implies that my deposit could be passed on higher in the chain, which will be held as agent for the seller. This means that the deposit could potentially be released to a developer before the chain completes. He advises that the risk in this in that should the chain fail to complete higher up the recovery of the deposit may become difficult.

As far as I am aware the vendor of the house I am buying is purchasing a chain free house, not a new build or anything off plan so I am very confused as to why potentially any deposit money ends up in the hands of a developer.

Is this a normal condition to include in a contract? Has anyone else experienced anything of the sort?

The easiest answer would be to speak to my solicitor but as many have experienced, its not very easy to get hold of my solicitor.

Guest101

Once you exchange it would be a terrible idea for anyone to pull out

lavalamp1

I agree. But the notion that it becomes difficult for me to reclaim my deposit is very concerning.
Why should the difficulty level be any different regardless of whether the money goes to a developer or a solicitor?

Guest101

It's not more difficult.

Your solicitor is scaring you unnecessarily.

G_M

Follow the advice of your solicitor, not wierdos like us on the internet - that's what you are paying him for.

If your deposit would be at risk, decline.

yes, the likelihood of the chain failing to Complete after Exchange is low, but it is for precisely that remote scenario that the deposit exists......

Guest101

I just don't understand why the solicitor is making a big deal about passing it up the chain, that's common in all chains.

Whether the last ( usually first..) in the chain is buying off plan or not.

lavalamp1

My understanding when exchanging is that the monies are stored in the client account of the vendor rather than actually releasing it to he/she.

matttye

I think you need more details from him.

The LSCP (Law Society Conveyancing Protocol) SCS (Standard Conditions of Sale) contain a clause which confirms that the deposit will be held as stakeholder unless it is required for a related purchase, in which case it will be held as agent for that purpose only.

If that is what the solicitor is referring to then that's very common in chains as many will rely on the deposit for their sale to fund the deposit for their linked purchase.

Any firm which is part of the Coneyancing Quality Scheme will use the LSCP.

If the deposit is to be held as agent generally then that is a much bigger concern.

matttye

lavalamp1 wrote: »

My understanding when exchanging is that the monies are stored in the client account of the vendor rather than actually releasing it to he/she.

Deposit held as stakeholder = cannot be released.

Deposit held as agent = can be released for any reason.

The LSCP offers a compromise as indicated in my above post.

lavalamp1

Thanks Mattye.

Could this mean the vendor is using my deposit money as agent to pay the deposit on his purchase?

matttye

lavalamp1 wrote: »

Thanks Mattye.

Could this mean the vendor is using my deposit money as agent to pay the deposit on his purchase?

Yes, but such scenarios are very common. It's true there is a risk you could lose your deposit once it has been used but basically to avoid the risk completely you'd need to either deal with someone who has no linked purchase or insist on dealing with someone who doesn't need to use your deposit as their deposit which would seriously limit your pool of potential buyers.

Your solicitor is probably just being cautious in warning you so that you can't sue him if it all goes tits up and you can't get your deposit back.